People that have nothing to hide don't run from the police. Under the circumstances, the police made the right decision. It still wouldn't surprise me if there was more to this young man than we know right now. He, or the house he was in, was being watched for some reason.
I believe he just happened to be passing the house. It's all just a stack of unfortunate coincidences (e.g. I'm sure he didn't consider that wearing a big coat would make him a suspected suicide bomber).
I've read that he lived in an apartment building (block of flats), not a house. Apparently, other residents of the building had terrorist connections.